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Amtrak's FY 2008 Key Performance Numbers

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The depreciation schedules for the locomotives, cars, and other rolling stock are a function of the estimated life of the assets, which differ individually, but taken as a whole are assumed to be over 40 years.       Amtrak uses straight line depreciation for financial reporting purposes.  Therefore, the amount chargeable to income each year is a function of the cost of the equipment, less the estimated salvage value, plus any capitalized repairs and enhancements that extent the estimated life of the asset.   Amtrak probably treats depreciation like most capital intensive industries.  Instead of depreciating each property unit, i.e. locomotive, cars, or other rolling stock, it lumps the costs into buckets and depreciates the buckets over the estimated average life span of the assets in the bucket. The accounting estimate of the life of the asset may be different from the on-the-ground experience.  For example, in the electric utility industry, where I worked for most of my life, gas fueled power plants were depreciated over 27 years.  The depreciation was based on sophisticated engineering curves.  Or that is what the engineers told us.  Yet we had many 40 year old plants that were in service. If Amtrak rebuilds a locomotive, car or other rolling stock, as it has done, and the improvements extend the useful life of the asset, the cost of the improvements is capitalized, along with the interest, and depreciated over the extended life of the asset.  Theoretically, if the equipment was rebuilt and rebuilt continuously, it would attract some depreciation with each rebuild. The depreciation schedules are approved by KPMG.  They are Amtrak's external auditors.    For these reasons I believe that the long distance trains are still wearing some depreciation, although the amount is not contained in Amtrak's public reports.  Whether it is five per cent or ten per cent or whatever is an estimate, which is true of some accounting data.  In calculating the loss per passenger mile I have never assigned more than ten per cent of the other charges (interest, depreciation, etc.) to the long distance trains.  In fact, in most of my posts, I state the contribution or loss before interest, depreciation, and unallocated system charges.       For management accounting purposes, which is used to determine the financial efficacy of a service line, i.e. NEC, other corridor trains, long distance trains, the depreciation is not a key number.  With the exception of the Auto Train, not a one of the long distance trains comes close to covering its avoidable costs let alone the share costs.  In FY 2008 they lost $481.8 million before interest, depreciation, and other system charges.
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